Emini and Forex Trading Update:
Tuesday October 13, 2020
I will update again at the end of the day.
Pre-Open market analysis
Yesterday was a strong bull trend day on the 5 minute chart. Furthermore, it was the 3rd consecutive close above the September trading range high. Traders expect a test of the all-time high. Bulls will therefore buy the 1st 1 to 2-day reversal down.
Yesterday was an extreme buy climax day on the 5-minute chart. The day after an exhaustive buy climax typically has at least a couple hours of sideways to down trading that starts by the end of the 2nd hour.
There is a 50% chance of some follow-through buying in the 1st hour. Can today rally strongly to a new all-time high? While that is possible, the 3 day rally has been extreme. There will probably be at least a one day pullback before there is a new high.
Overnight Emini Globex trading
The Emini is down 5 points in the Globex session. After yesterday’s big rally and 4 days of strong rallying, the bulls will be inclined to take some profits today. Therefore, today will probably not be a big bull day. If there is an early rally for a couple hours, it will attract profit-taking. Traders will look for a reversal down.
Traders expect a trading range. Therefore, they will look for reversals, even if there is a strong trend up or down for 2 – 3 hours. They will swing trade the trend, but know that a reversal will be more likely than today continuing all day as a trend in either direction.
Yesterday’s setups
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
EURUSD Forex market trading strategies
The EURUSD Forex market on the daily chart has been in a trading range for 3 months. After breaking below the range, it reversed back up to the middle of the range and the September 2018 high.
The bulls hope that the reversal up will continue to above the September high. The 3-week rally is a Small Pullback Bull Trend. But it is also a wedge, and the EURUSD might be forming a lower high in a bear channel that began with the September high.
When a market is in a trading range, it is neutral. The bulls and bears alternate control every few days, but the probability of a bull or breakout stays around 50%. That is the case now.
As long as the EURUSD stays below the September 19 lower high, it is slightly more bearish. If the bears get a break below the September low, the chart will become more bearish. If the bulls get a break above the September 1 high, the chart will again be bullish.
Overnight EURUSD Forex trading
The 5-minute chart of the EURUSD Forex market traded below yesterday’s low. That triggered a sell signal on the daily chart for a wedge bear flag. But yesterday was a doji bar, which is a weak sell signal bar. Also, the 3-week rally has been in a tight bull channel (a Small Pullback Bull Trend). That is bad context for traders hoping for a resumption of the bear trend. Therefore, the EURUSD bounced up from below yesterday’s low.
There were about as many buyers below the sell signal bar as they were sellers. The EURUSD has been mostly sideways overnight. Day traders have been looking for 10-pip scalps up and down.
The bears want the day to close far below yesterday’s low to compensate for the weak sell signal bar on the daily chart. At the moment, that is unlikely.
The bulls want a strong reversal up to above last week’s high. But the bars and legs have been small overnight, and that, too, is unlikely. Day traders will continue to scalp, unless there are 2 or 3 consecutive big trend bars up or down.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Here are several reasonable stop entry setups for today. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro Emini.
End of day summary
The Emini sold off today in a weak bear channel. It was mostly a trading range day. It reversed up from several magnets, which were the 3500 Big Round Number, the 60-minute 20-bar EMA, the open of the week, and yesterday’s low.
The bears want the Emini to fall below Friday’s high, which was last week’s high. I mentioned yesterday that the Emini gapped up on the weekly chart. I said there were many weekly gaps up this summer, but most closed before the end of the week. The bears are trying to close this week’s gap as well.
I wrote this morning that the Emini would probably have a pullback this week because 4 consecutive bull bars was getting extreme. Since today traded below yesterday’s low, today was a pullback.
It is now a High 1 bull flag buy signal bar for tomorrow. But because it had a bear body, it is a weak buy setup. There might be more sellers than buyers above its high. Consequently, the Emini might go sideways again tomorrow. Traders might want to see one more test of the support at today’s low before they are confident that the 4-day rally will resume.
The bears are hoping that the 4-week rally will form a lower high on the daily chart. However, after 4 bull days, the bears will probably need at least a micro double top before they can get a reversal down.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Trading Room
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a 2 day free trial.
Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Market Update page.
Al on Oct 13, I went short SP500 at 6:57 am PT as it made a new low of the day and covered at 8:25 am PT for a loss.
I then went long (and stopped out each time) at 8:31am PT (bar 24), 9:58 am PT (bar 41 betting on reversal), 10:34 am PT (bar 47 again betting on reversal). What , if any, did I see wrong?
Broad bear channels are always bottoming, but every rally fails around the EMA. Whenever the market is not letting you buy with a stop far below the EMA and instead forces you to buy just below the EMA, it is usually trapping you. It is better to not take those buys. There will be more bears selling those bull bars just below the EMA.
Is a stop above bar 35 an okay buy for a MTR with 2 legs down and a double bottom with 16?
Hi Charles, I’d be interested to hear Al’s perspective as well.
My perspective is that the bull first leg was pretty weak with no consecutive good looking bull bars. Buying above bar 35 is buying at the top of the current bear micro-channel, I think either waiting for a 2nd entry or using a wide stop being prepared to scale in would give you a more positive traders equation.
As you may know, if a lot of bars are just below the EMA, I am thinking that the market might be in a bear channel. That means there are often more traders selling the close of strong bull bars just below the EMA. Consequently, I rarely ever buy them.
I either buy earlier (lower) if there is a good setup, wait for consecutive big bars (like at the end of the day after the strong reversal up from support), or I wait for 1 – 2 bull bars closing far above the EMA.
Look at the 15 minute chart. The tight bear channel just below the EMA is easier to see. Not good for the bulls.
Hi Al,
Had you bought 28H expecting bears to be trapped and saw 29, would you be dissapointed enough to exit?
Thanks!
I assume you mean the 28 close and not the high. With the rally as strong as it was, despite a possible parabolic wedge buy climax, I would have held. But if 29 closed on its low, I might have exited below. I could always buy again above the next bull bar closing near its high.